I had a fun conversation the other day with someone who, while not exactly an economist, was clearly quite interested in neoclassical economics and had some definite ideas about what he or she felt constituted the core of neoclassical welfare economics specifically. We disagreed, and I’ve explained my views often enough I don’t think there’s any point in going over that bit of the conversation, which involved some misunderstanding of “utility” as defined in neoclassical economics and some funny notion of “aggregating” it, as it so often does. The more interesting bit for me, and the bit I wanted to discuss here today, is that it got me thinking that if one doesn’t distinguish normative neoclassical welfare economics as a normative theory with defined content, that is, defined inputs and defined conclusions, from neoclassical welfare economics as widely conceived, presented, practiced, applied, one will never really be able to come to grips with bad economics.
If one doesn’t distinguish the actual theory of neoclassical welfare economics from popular presentations, accepted interpretations, academic conventions and norms, and so on, one will be forever in the position of critiquing what one supposes is “neoclassical welfare economics” only to have some economist suggest whatever issue one is raising does not appear in economic theory. One will end up dealing with an endless procession of baits and switches, whack-a-mole, whatever one likes to call it. One must be clear from the outset whether one is critiquing the actual theory of neoclassical welfare economics, the real normative or ethical theory that purports to establish the optimality of perfect competitive market structures under particular and rather peculiar conditions, or some particular interpretation or rendition or instance or application of neoclassical welfare economics, because all manner of funny business can, and in my experience does, take place between the two.
Of course, as I’ve argued before, some elements of what I call bad economics do, indeed, involve vague or inconsistent bits within the theory of neoclassical welfare economics itself. However, I’ve found that in the world of theory proper, it’s not so much that one finds explicit ethical content objectionable as that one finds bits that are unclear, vague, inconsistent, and seemingly purposefully calculated to misdirect or deceive. The lion’s share of bad economics involves normative or value inputs and ethical propositions that are not properly identified, discussed, or evaluated, in neoclassical welfare economics itself, value inputs exogenous to economic theory that are added on in practice without comment, and various convenient errors and bits of rhetorical nonsense like fake distributional indifference. Bad economics happens on the journey from the actual theory as it exists in its natural habitat, which I call the Fairy Land of Economic Theory, to the interpretation or application of that theory in the real world.
My take on the actual theory of neoclassical welfare economics is that one can certainly critique it for facilitating confusion and error, but it says what it says, and there is even some potential use for it once one clarifies the awkward bits. But let’s be real. No one just stumbles upon something as odd as the ethical half-theory structure of neoclassical welfare economics. No one innocently redefines the concept of “utility” to make it irrelevant to the lion’s share of ethical issues but continues using it anyway. Neoclassical welfare economics seems to have been rather obviously designed with bad rhetorical intent to foster confusion and facilitate bad economics, but that doesn’t mean it can’t be analyzed as an intellectual construct and potentially used for good.
Addressing bad economics is like solving a puzzle. What thought process leads one to suppose A follows from B when really it doesn’t? How could one express B to avoid the false impression it leads to A? It’s fun and interesting. Everyone should enjoy confronting bad economics as intellectual exercise if nothing else. Need some motivation to play the game? Neoclassical welfare economics was ostensibly designed to avoid ethically controversial inputs. If one is deriving normative results or conclusions one finds are not accepted as a matter of course by others, one should wonder how. A logical, analytical argument cannot normally create or generate ethical controversy by rearranging and manipulating ethically uncontroversial inputs. Are other people stupid? Are one’s logical manipulations and arguments too confusing for their puny minds? Other people don’t understand the logical implications of their own ethical beliefs? Or might it be one has misstated the normative inputs or evaluated them incorrectly? Inquiring minds will want to know.
